Finance - Accounting Seminars

Sovereign debt yields have declined dramatically over the last half-century. Standard explanations, including aging populations and increases in asset demand from abroad, encounter difficulties when confronted with the full range of evidence. We propose an explanation based on a decline in inflation and default risk, which we argue is more consistent with the long-run nature of the interest-rate decline. We show that a model with investment, inventory storage, and sovereign default captures the decline in interest rates, the stability of equity valuation ratios, and the recent reduction in investment and output growth coinciding with the binding zero lower bound.

We study Germany’s landmark quota requiring major public companies to hire a female top executive. We find that the quota significantly increased top executives’ gender diversity at targeted firms. Although firms largely recruited women who were outside of their networks and lacked prior public-company top executive experience, they were chosen over male candidates with similar profiles. The new female top executives were mostly appointed to HR or niche roles. Although markets initially reacted negatively to the quota’s development, this reversed after the law was enacted, and we find no lasting effects on firm performance or valuation.
 

This paper demonstrates that public firms tend to over-state their competition position by listing
much larger firms as their direct competitors in their SEC 10-K filings, even if they operate in
different industries and produce different products. This behavior is more prevalent in firms whose
executives’ compensations are more closely tied to the value of firm equity. Over-positioning leads
to temporarily high stock returns, as well as high executive compensation and high takeover
likelihood, yet it is not coupled with a significant improvement in firm fundamentals, such as asset
value and profitability.